Gold Demand in India Seen Falling as Prices Surge, Investment Buying Rises
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India’s gold consumption is projected to decline to 650-700 tonnes in 2024 from 802.8 tonnes in 2023, largely due to a significant price increase that has impacted demand in one of the world’s largest gold markets.
Price Surge and Consumer Behavior
– Gold prices have skyrocketed over 65% since January, currently standing at Rs 1,32,394 per 10 grams.
– Despite the elevated prices, consumers are opting for 22-carat lightweight plain gold jewellery rather than shifting to lower karat alternatives like 18-carat, 14-carat, and 9-carat gold. This preference reflects a traditional attachment to higher-quality gold, as noted by Sachin Jain, CEO of the World Gold Council (WGC) India.
“This shift to lower karat gold jewellery will take some time for Indians to embrace,” Jain commented.
Diverging Trends in Gold Demand
Gold demand in India showcases a split trend:
– Strong Investment Demand: There’s a notable surge in investment purchases as buyers are drawn to gold as a safe asset amid volatile markets.
– Weakness in Jewellery Segment: Retailers and manufacturers report a decline in gold jewellery sales year-on-year, even during the wedding season, attributing this to the pressure of high prices and affordability.
Feedback from stakeholders indicates:
– Gold jewellery sales have decreased despite favorable wedding seasons due to the financial constraints posed by current prices.
Import Data
– From January to September 2024, India’s total gold consumption reached 462.4 tonnes.
– Gold imports are at $55 billion year-to-date, a 2% rise from the previous year. However, by volume, imports fell nearly 20% to approximately 580 tonnes, indicating that price hikes are driving the increase in import value.
“While the value of gold imports has risen, the volume—particularly in the mid- and small-ticket segments—is under pressure,” Jain elaborated.
Wealthy Consumers and Small Jewelers
– High Net-Worth Individuals (HNIs) have been purchasing heavier gold items (ranging from 100-400 grams) amid the price rally, yet their increased buying isn’t enough to balance overall demand.
– The traditional jewellery market faces challenges; larger jewellers report relative stability due to higher-purchase wedding orders, while small and standalone jewellers find themselves struggling.
Investment Products on the Rise
Demand for gold investment products, especially bars and coins, is robust:
– The period between July and October 2024 saw import volumes increase to 340 tonnes, up from 204 tonnes in the earlier June period.
– Jain noted an emerging trend where entry-level consumers are purchasing gold coins, encouraged by the ongoing price increase.
Conclusion
Overall, while gold demand in India is expected to decline due to soaring prices, investment buying—particularly in bars and coins—remains strong. The retail landscape is adapting, with larger retailers faring better than smaller jewellers amid these price fluctuations. As the market evolves, understanding the dynamics of consumer preferences and investment behavior in gold will remain crucial for stakeholders.